Session “International standards for planning and conducting procurement process”

1. Session “International standards for planning and conducting procurement process” Contracting entities and contracts covered – coverage issues according to international standards Johannes S. Schnitzer EBRD-Consultant, WOLF THEISS Kiev, 1-2 March 2012

2. Agenda WhichEntityisCovered? WhichContractisCovered? Exceptionsandlimits Financial ThresholdsandValuationofContracts

3. state Procurement Planning Public Contract Two-stage tender procedure One-stage tender proceudre market Restricted / negotiateded procedure (with prior publication) Open procedure

4. Steps

5. Covered Entity? (1) EU Public Procurement Directives (EU-PPD) Contracting Authority (CA) The state Local and Regional Authorities; “Bodies governed by public law” Utilities Bodies engaged in the sectors of water; transport; energy; and postal services CA “Public undertakings” Private companies operating on the basis of a “special or exclusive right”

6. Covered Entity (2) WTO Government Procurement Agreement (GPA) Positive, negative, discpriptional approach Central-Government Entities (Annex 1) Sub-Central Government Entities (Annex 2) Other Entities (Annex 3) (General Notes) UNCITRAL Model Law on Public Procurement (UNCITRAL-LAW) „Any governmental, department, agency, organ or other unit, or any subdivision or multiplicity thereof, that engages in procurement, except…“ „Any department, agency, organ or other unit, or any subdivision or multiplicity thereof, or the [Government] that engages in procurement, except…;“

7. Covered Entity (2) Examples (German) Public Broadcasting Company (ECJ, C-337/06) (Austrian) Funeral Company (ECJ, C-373/00) (Austrian) Printing Company providing support services for government services (ECJ, C-44/96) (Italian) Trade promoting company (ECJ, C-233/99 and C-260/99) (English) University (ECJ, C-380/98) (Spanish) Prison company (construction and operation) (ECJ, C-283/00) German statutory sickness insurance fund (ECJ, C-300/07)

8. Covered Contract (1)  wrong classification: risk of legal challenge ! Public contracts in writing for pecuniary interest which are (1) Work contracts E.g.: Construction of a hospital; renovation of a office building; design and construction of a sport stadium; construction of a waste-water disposal plant, etc Annex 1 to EU-PPD (NACE code) http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2004:134:0114:0240:EN:PDF Supply contracts E.g.: Purchase of software; purchase of office equipment; supply of energy; purchase of pharmaceuticals; lease of cars CPV-Codes http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:074:0001:0375:EN:PDF

9. Covered Contract (2) Public contracts in writing for pecuniary interest which are (2) Service contracts E.g.: Architect and engineering services; cleaning services; marketing and PR services; legal services Annex 2a and 2b to EU-PPD http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2004:134:0114:0240:EN:PDF UNCITRAL-LAW Applies to all public procurement  acquisition of goods, conduction or services by a procuring entity GPA Applies to any procurement by any contractual means

10. Covered Contract (3) Mixed Contracts (1) Contain work, supplies and/or services in a single contract E.g. Purchase of vehicles and their maintenance  Classification of either works, supply or service contract ! Boundary between supplies and services: Main-Value test: which value is higher (supplies or services) ? Boundary between works and services Main-object test: what is the principal object of the contract ? Boundary between works and supply Predominant-purpose test

11. Covered Contract (4) Mixed Contracts (2) Boundary between works and supply contract Tunnel radio system – case law Austria The renewal of a tunnel radio system is – despite the scope of supply – classified as a works contract  Works serve the functionality of the building Equipment for waste-water treatment plant– case law Austria Equipment (electrical distributor, electrical installation, process control system) and installation of equipment classified as works contract  fixed connection with the plant

12. Covered Contract (5) Mixed Contracts (3) Boundary between works and service contract Fire alarm system – case law Austria Service contract  contractor was not only responsible for the renewal of the fire alarm system but also for the maintenance for an unlimited period (value of service part prevailed) landfill remediation – case law Austria Service contract  transport, waste disposal, waste recycling was main objective of the contract (not excavation works, digging activities, etc)

13. Covered Contract (6) Mixed Contracts (4) Boundary between supplies and service contract Data processing system – ECJ case law Supply contract if value of supplies is higher than value of „immaterial services“

14. Covered Contract (7) Mixed Contracts (5) Boundary between priority and non-priority services Differentiation via main value test! Principal purpose of the service package is irrelevant Value is decisive (ECJ, C-76/97 Tögel; ECJ, C-411/00 Felix Swoboda) Prevailing of the priority part means the entire order is treated as a priority service Prevailing of the non-priority part on the contrary means the entire order is treated as a priority service

15. Covered Contract (8) Mixed Contracts (6) Further Examples – case law Austria Design, financing, construction and operation of a lorry toll  main purpose of the contract was not the construction of the toll system but rather its operation  supply of goods was also not subject matter of contract since the service provider (responsible for the operation of the system) had to use the technical equipment in order to operate the system  = service contract since contract‘s main purpose is toll collection

16. Exemptions (1) Contracts for defense purposes and contracts affected by security considerations GPA excludes defense procurement EU Defense Procurement Directive Certain International Contracts Joint projects with, for instance, United Nations International agreements on the stationing of troops Broadcasting services E.g. purchase of advertisements by BBC Central bank services Contracts for the acquisition of land

17. Exemptions (2) Service Concessions = service contract under which provider is remunerated by exploiting the service provided  provider has the right to exploit for payment of its own service  provider assumes the economic risk arising from the provision and management of the service E.g. private firm operates a transport service and obtains payment by passengers ECJ, C-324/98 Teleaustria  transparency obligation: “degree of advertising sufficient to enable the service concession to be opened up to competition”

18. Exemptions (2) In-House Procurement (1) Contracts performed with contracting authority's own internal resources are excluded • In-House Procurement (1) • Contracts performed with contracting authority's own internal resources are excluded market state Public contracting entity ESSENTIAL ACTIVITIES CONTROL Provider private sector

19. Exemptions (3) In-House Procurement (2) Two criteria (“Teckalconditions”) the procuring entity exercises over that person a control similar to that which its exercises over its own departments; and No control if Any of suppliers capital is owned by private entities (ECJ, C-26/03 Stadt Halle) Some or all of its capital will be sold to private entities in short time (ECJ, C-29/04 StadtMödling) Supplier enjoys management independence (ECG, C-458/03 PakingPrixen) that person “carries out the essential part oft its activities with the procuring entity ” In-house-company ismainlyactiveforprocuringentity (ECJ, C-295/05 Asemfo)

20. Exemptions (4) In-House Procurement (3) ECJ, C-573 Sea Srl Italian local authorities awarded waste disposal contracts to the company “Setco” (which they jointly owned) the public shareholders collectively exercised decisive influence over Setco’s strategic objectives and decisions  Award to Setco with waste disposal services was exempted from public procurement law

21. Other limits Only one possible provider if only one firm is authorized by law to provide a particular service  ECJ, C-220/06: the provision of certain postal services (by the Spanish government) was entrusted exclusively to one company  competition law (nowadays) might prohibit that states my reserve certain rights to one provider

22. Financial Thresholds and Valuation of Contracts (1) Applicability of rules only to contracts above certain financial values (thresholds) EU-PPD  seek to identify contracts for which there is likely to be cross-boarder competition GPA depends on each GPA-party and “Annex-entity” (e.g. Armenia see below)

23. Financial Thresholds and Valuation of Contracts (2) Estimated value net  total amount payable E.g. past experience External expert opinion (if necessary) Time at which CA commences the procedure  normally, time at which contract notice is send off Obligation to take account of the highest possible value  including options (EU-PPD)  all forms of remuneration, including, inter alia, feeds, commissions, etc (GPA) Aggregation rules  prohibition of “contract splitting” to avoid thresholds EU’s aggregation rules are are quite complex  not replicated under GPA and UNCITRAL-Law

24. Contact Johannes S. Schnitzer, Dr. iur, LL.M. Tel: + 43 / 1 / 51510 – 2350 Fax: +43 / 1 / 51510 – 665355 E-Mail: johannes.schnitzer@wolftheiss.com WOLF THEISS Attorneys-at-LawSchubertring 61010 ViennaAustria